Banco Bilbao to Banesto, Gas Natural to Endesa or BBVA to Sabadell, among others. The history of hostile takeovers in Spain is not very extensive but it is well remembered. When a company wants to buy another listed company, but the leadership refuses to negotiate or does not even try to court it, it can launch a direct offer to all shareholders and hope that they accept it without the managers being able to do much to prevent it. . That's why it's called a hostile takeover. AND…

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Banco Bilbao to Banesto, Gas Natural to Endesa or BBVA to Sabadell, among others. The history of hostile takeovers in Spain is not very extensive but it is well remembered. When a company wants to buy another listed company, but the leadership refuses to negotiate or does not even try to court it, it can launch a direct offer to all shareholders and hope that they accept it without the managers being able to do much to prevent it. . That's why it's called a hostile takeover. BBVA has just launched one at Sabadell and it has raised eyebrows not only in the Sabadell council, but also in the Government, Catalan businessmen, political groups and unions. The bank repeats like a mantra that this is a tremendously attractive operation for all interest groups. But then, why is this hostile takeover so hostile?

Business wars usually remain in the upper financial spheres. But in the case of a merger between two large banks, concern drops to street level, since millions of people need to know what is going to happen to their savings account, mortgage or car insurance. Therefore, any step must be treated with extreme care. “In these operations, the timing and forms matter more than the substance,” explains a bank manager. And the times got out of BBVA's control too soon.

The president of the bank, Carlos Torres, met in mid-April with his counterpart at Sabadell, Josep Oliu, and scheduled a meeting in May to explore the merger. That meeting never took place because there were leaks about BBVA's intentions and the bank decided to publish the merger offer through a letter. He had sent that letter to Sabadell just two minutes before. In San Cugat del Vallés they considered that they had begun to lose their forms.

After the Catalan bank refused to sit down to negotiate, BBVA put aside its friendly offer to launch the hostile takeover bid. The proposal to Sabadell shareholders is based on an exchange of shares: one BBVA title for every 4.83 of the Catalan bank. Three months ago that meant paying Sabadell shareholders double what their shares were worth. But since the offer was announced, BBVA's price has gone down several times and Sabadell's has gone up several times, leaving that premium at just 7.5%. BBVA insists that this is an “exceptionally favorable” offer. But in general, analysts consider that it is not so generous.

“Sabadell shareholders may consider the offer insufficient, as the bank still appears to have a long way to go. We expect Sabadell to continue delivering strong returns in 2024 thanks to higher interest rates and also has the potential to make further improvements in 2025 once interest rates start to fall. Sabadell shareholders could also prefer a greater part of the offer in cash instead of shares, since the figures that BBVA has achieved seem to suggest that there is not much room for revaluation on the stock market,” explains María Jesús Parra, analyst at Morningstar.

Beyond the issue of money, another power war is being waged in parallel. Banks are made up of hundreds of managers, with important positions (and salaries) that they want to keep. BBVA proposed that Sabadell have a weight of 16% of the business, with three directors on a board made up of 15 members. A reward that on the other hand is considered scarce for a management team that has managed to multiply the value of the bank by four in the last four years. Furthermore, if the takeover bid is successful, the distribution of management positions among Sabadell employees could be lower, since there is no friendly negotiation.

Symbol of the Catalan bourgeoisie

Banco Sabadell is a symbol of the Catalan bourgeoisie. Since its origins, the entity has maintained a marked specialization in financial services for companies. The city of Sabadell and its surroundings grew driven by the textile industry and there the bank acted as a driving force to provide financing to the local business community, which allowed for the forging of a good relationship between bankers and businessmen, which has been maintained until the modern era.

The president of the bank, Josep Oliu, ascended to the position in 1999 and in his first years was in charge of creating a shareholding made up of renowned Catalan businessmen to create an alliance that would avoid any attempt at a hostile takeover like the one launched by BBVA. La Caixa (today CaixaBank) was the bank's main investor for years. It also had important shareholders such as Isak Andic, the founder of Mango, José Manuel Lara, at that time president of the Planeta group, or Enrique Bañuelos, who presided over the Valencian real estate company Astroc. Other illustrious names of the Spanish business community, such as Alicia Koplowitz, Juan Roig (Mercadona), Héctor Colonques (Porcelanosa), Joaquim Folch-Rusiñol (Industrias Titán) and Sol Daurella (Coca-Cola), also formed part of the bank's shareholders.

Sabadell has lost that core of trust, but continues to represent a symbol for the Catalan business fabric, especially among small and medium-sized companies. The entity is the leader in credit to companies in Spain and companies fear that credit will be restricted. “What business owners tell us is that they are afraid that by reducing supply they will lose financing options. BBVA has already absorbed Catalunya Caixa and the companies' financing positions were not maintained. We always say that it is easier to get five loans of 100,000 euros than one of 500,000. If there are no longer five windows where you can go to request it, but only two, it is more complicated,” explains Pere Cots, director of the financing area of ​​Pimec, the Catalan employers' association for small businesses.

BBVA assures that the merger would give the bank an additional capacity of 5,000 million euros to grant credit and has committed to boosting financing in Catalonia. But business owners are wary of the long-term effects. Catalan society would see one of the last financial bastions still standing lost after the economic crisis of the early 2000s saw the disappearance of a dozen entities that ended up being absorbed. “We have already suffered a decrease in entities in recent years. BBVA is an entity with a very strong participation in Catalonia. And what SMEs need is to have an offer,” summarizes Cots.

Concentration and oligopoly

BBVA's takeover bid for Sabadell has also set off alarm bells in the Government. If the operation goes ahead, the bulk of the Spanish market will be in the hands of three large banks: CaixaBank, BBVA and Santander. The main concern is that as there are fewer entities, the conditions for accessing credit will be tougher. “The CMNC could see this consolidation as a threat to healthy competition,” explains María Jesús Parra.

In the last 20 years the Spanish banking map has changed completely. Of the 55 entities that existed in 2009, only 10 large banking groups remain, which will increase to nine if BBVA's takeover bid for Sabadell goes ahead. The group of Basque origin estimates that the entity resulting from the merger would have a credit market share of 22%. And the first three entities would account for more than 70% of the business. In addition, the BBVA-Sabadell union would be the only entity with a bank office in 48 postal codes.

BBVA defends that in recent years competition has increased because digital banks, foreign entities and fintech have added to the offer that traditional banking already offered, so if a client is not satisfied with the conditions offered by their bank, You can change entities in a few minutes using your mobile phone. The problem with the shortage of offices is located more in rural areas, where there is only one branch. These areas, largely populated by older people and less accustomed to technology, prefer to have all their banking operations in the entity that has an establishment nearby. This creates the risk that if there is only one branch, the bank may charge higher fees, charge higher prices for credit, and pay less interest on deposits.

Likewise, the takeover has unleashed the concern of the unions. These types of operations always usually entail a reduction in employment to gain synergies in the form of cost savings. BBVA has assured that the measures would not be traumatic, suggesting an early retirement plan. But it has not yet detailed the number of possible casualties and the labor forces are suspicious of the outcome. “We will not allow templates to be the cost of this operation. We will not accept forced measures because both entities have just presented record profits, there are no excuses,” they point out from UGT.

There are still several chapters to complete until the outcome of a takeover bid that can extend up to a year in time. But for now, BBVA has presented an offer that it considers “extremely attractive” and that, whether due to timing or forms, this hostile takeover has sparked a string of hostilities.

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